New ABA chairman upbeat about baking growth potential

by World Grain Staff
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Fred Penny preisdent of ABA
Fred Penny of Bimbo Bakeries sees vital role for ABA in industry.

HORSHAM, PENNSYLVANIA, U.S. — During a challenging time for the commercial sliced bread industry, growth opportunities remain to be found through thoughtful and persistent innovation, said Fred Penny, president of Bimbo Bakeries USA (BBU), Horsham, Pennsylvania, U.S.

The incoming chairman of the American Bakers Association (ABA), Penny in an interview with Milling & Baking News, sister publication of World Grain, discussed the state of the baking industry, steps BBU is taking to grow its business and the ABA’s vital role for the industry.

Penny has spent 32 years, nearly his entire professional career, in baking, beginning with General Foods. He began in a finance role with Entenmann’s.

“Over my career I have worked in finance, strategy, general management and marketing,” Penny said. “This gives me a wide range of experiences to draw from. Having gone through multiple acquisitions and divestitures, I’ve seen pretty much all of what you can see in the industry. I think it certainly helped me prepare for the leadership role I assumed in 2013 at BBU and will serve me well in my role as ABA chairman.”

Penny was promoted to president of BBU in February 2013, succeeding Gary Prince.

Penny holds a bachelor’s degree in business administration from Long Island University and a master’s degree in finance from New York University. At General Foods and later with Kraft, Penny advanced through a number of positions of growing responsibility. In 1990, he was named director of strategic planning and productivity for Kraft Baking and in 1993 was promoted to general manager of the Intermountain market area, based in Denver. Four years later he became vice-president and general manager in the Northeast. He was promoted to executive vice-president of George Weston Bakeries, Inc. in 2007.

One of Penny’s first bosses at Entenmann’s (acquired by General Foods in 1982) was David Johnson, a charismatic executive who later went on to lead Campbell Soup Co. as chief executive officer.

“The one thing that I recall most vividly about David is that after he was finished speaking to a group, he had the ability to energize them around what he was trying to do with the business,” he said. “That stuck with me because you have to be able to fmotivate and inspire people when you are the leader of a company — motivate them to follow the vision and objectives you’re setting so they can and want to contribute.”

Asked about challenges retailers face in the “center of the store,” the part of supermarkets where sliced bread is sold, Penny suggested that the characterization of this part of stores may have been overblown.

“Sharp retail operators are finding growth across the store whether it’s in the perimeter or center,” he said. “We checked the numbers for the top 20 supermarket retailers over the last few quarters, and the vast majority are showing decent retail sales dollar growth. There are a select few that are negative, but I think that has more to do with competition and with some of the changes in the landscape. I think good operators manage to find growth and identify what it is that consumers want and need.

“The bread category is important for all retailers; it’s the No. 1 driver of trips in retail. We have a great opportunity from an industry standpoint to work with the retailers and to leverage the knowledge around the importance of bread — it can drive higher baskets. It requires being a sharp operator and being innovative.”

Still, the environment for the wholesale baking industry has been less than ideal, Penny said.

“Bread, particularly the commercial sliced bread category, has its challenges,” he said. “It has been ‘sluggish,’ or slightly negative in tonnage, for a number of years now. However, there are growth opportunities if you can find products that consumers want, which is why new products and innovation are so important.

“Beyond that, the industry has to promote bread in a positive way and refute a lot of the inaccurate publications claiming that bread is not good for you. The Grain Foods Foundation, as well as industry players and the ABA, have a major role in changing this dialogue.”

In a 2013 presentation before the ELDC Baking Industry Forum during the International Baking Industry Exposition (IBIE), Penny said creating a single centralized organizational culture was a principal objective of his as the new president of Bimbo Bakeries USA. Bimbo at the time was completing the integration of the Sara Lee fresh baking business and had made numerous other acquisitions since BBU was created in 1994.

In the interview, Penny said within the legacy companies, such as Sara Lee, Weston and Mrs Baird’s, “there were, as you’d expect, different cultures.”

“I think we’ve made a lot of progress on that front,” he said. “There is more to do, but we look a lot different today than we did just a few years ago. We’ve done a lot of work to update our manufacturing and supply chain footprints, and we have moved to one technology platform. We have one common culture for how we want to operate the business, sharing a single mission, vision and beliefs system. I feel good about where we are today given the magnitude of integration we’ve come through.”

Safety and sustainability were two areas Penny highlighted where a single BBU approach has been vigorously pursued.

“All companies aspire to be safe but, given the history of the industry, we had a lot of work to do,” Penny said. “We really galvanized around safety, and the organization has made a ton of progress. Our numbers have gotten consistently better year over year over year.”

Sustainability has factored importantly in all new BBU plant construction, but the push goes considerably further, Penny said. The company has strong programs at all its plants around recycling, high-efficiency lighting, water use, utilities and more, he said.

“Sustainability is a great example of an initiative that all associates, irrespective of what legacy baking company they come from, can really get behind,” he said.

New product development and marketing also have been areas in which the company has worked to come together as one.

“As the Sara Lee integration and related heavy lifting are behind us, we’ve become a lot more focused on building our strongest brands and being more aggressive in bringing new product innovation to the market,” Penny said. “This is not easy to do because the failure rate of new products is pretty high, and finding winners isn’t necessarily easy, but we’ve put more focus on that as we’ve moved through the restructuring. We’ve been able to put more focus on brand building, brand investment and innovation.”

Elaborating on new BBU product introductions, Penny highlighted Artesano bread sold under the Sara Lee brand and Little Bites, portion-controlled mini muffin snacks, as both doing  well.

“We’re also in organic with a brand called Eureka! that has been expanding,” he said. “To tap into consumers’ desire for whole grain premium products, we launched a line of breads called ‘Healthful’ as well as a few wide pan products called Extra Grainy under the Arnold, Brownberry and Oroweat brands. In breakfast, primarily under the Thomas’ brand, we have introduced a number of seasonal varieties. In basically any part of our portfolio, whether it’s mainstream bread, premium bread, breakfast, or sweet baked goods, we have been active with new products and new varieties to try and fuel growth.

“We need to have all the categories working — whether it’s breakfast, sweet goods, mainstream bread or premium bread. To that extent, we’re focused on innovation across all the categories. “

At the time BBU acquired the Sara Lee fresh business, its executives said up to $1 billion in capital outlays could be forthcoming to update the company’s production and distribution assets. Over the past three years, new plants have been built in Rockwell, Texas, U.S., and Lehigh, Pennsylvania, U.S., and many of the company’s 57 other plants have received investment, Penny said.

“We have also been very active in consolidating distribution centers and building newer, larger distribution centers that are more efficient,” he said. “We are very fortunate to be part of Grupo Bimbo because it is a baking company at its core and one that is completely committed to the industry. Their long-term view of the business has allowed us to make the kind of investments we have made over the years.”

The IBIE represents an “important piece” of the company’s plant modernization efforts.

“Grupo Bimbo will be well represented at this year’s IBIE,” he said. “Over the years when our BBU teams have attended, we inevitably come back with many great ideas for the business, particularly for our bakeries. While IBIE isn’t until October, the initial attendance information already indicates an extremely strong showing. I’m excited about the educational curriculum, Baking Expo and Innovation Showcase and expect IBIE to be very successful this year.”

 For companies large and small, the ABA represents an important resource for the baking industry, Penny said.

“It would be extremely difficult if not impossible and certainly very expensive for individual bakers or individual companies to tackle the kinds of issues that the industry faces without the ABA,” he said. “There is strength in numbers and certainly a very strong team under Robb’s leadership (MacKie, president and chief executive officer of ABA). They understand the issues, know how to navigate Washington, and represent the industry well. We’re much better served to have the ABA represent us on difficult issues than to try and tackle them on our own.”

Among topics of greatest concern for the baking industry highlighted by Penny, labeling of food products containing bioengineered ingredients headlined the list.

“State-by-state labeling requirements, beginning with the Vermont law effective July 1, will have huge financial implications not only to our industry, but consumers everywhere,” he said. “As importantly, a state-by-state regulatory framework will not add to transparency or understanding for consumers. We will continue to support a solution that is most beneficial to the consumer in terms of information and cost while balancing business efficiency concerns.”

From a more internal point of view, a prospective skills gap facing baking companies as baby boomers retire represents a major challenge requiring immediate attention, Penny said.

“We need a comprehensive talent management plan across the baking industry to attract and retain critical talent,” he said. “ABA is leading the way in addressing skills gap concerns and working to find solutions to fill the critical void in the number of skilled employees to work in our industry. Additionally, we know we live in a world where millennials want different things from their employers and their work experience. We need to figure out how to show emerging talent the exciting opportunities in this industry.”

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